The recent dominance of small cap stocks came to an end as the Russell 2000 (RUT) dropped just over 0.5% while the Russell 1000 (RUI) gained 0.13%. That places RUI at a performance advantage of just over 3.25% for 2017.
The volatility indexes based on large cap (VIX) and small cap indexes (Russell 2000 Volatility Index – RVX) reflect the extra risk that showed up in the underperformance of RUT. Note the spike down in mid-September on the chart below that was followed[...]

Small cap stocks had a great week last week with the Russell 2000 (RUT) rising 2.25% which the large cap focused Russell 1000 (RUI) was up about 1.6%. For the year RUI still has just over a 6% lead on RUT.
Small cap volatility as measured by the CBOE Russell 2000 Volatility Index (RVX) has spent most of 2017 at a historically high premium relative to large cap volatility, best depicted by VIX. The chart below shows RVX basically crashing to the lowest levels seen in 2017 last week. [...]

We got a pretty orderly shift down in the VIX curve last week as the market easily digested a rate hike by the FOMC. Also, the March premium to spot VIX at about 0.50 is pretty narrow, however the April premium remains a bit wide based on pending events in Europe.
We have been paying attention to the VSTOXX term structure due to market concerns about the pending French election. It appears the Dutch results pushed spot VSTOXX lower, in fact the reaction was the biggest one day[...]

At the 33rd Annual CBOE Risk Management Conference in California last week, several speakers discussed ways to use sentiment analysis and the volatility risk premium in their quest to add alpha and enhance the risk-adjusted returns of their portfolios.
I am pleased to report that two upcoming events will provide more details and analysis of the topics of developing investable and actionable intelligence from analysis of sentiment trends on social media, and generating attractive risk-adjusted returns[...]

The short end of the VXST – VIX – VXV – VXMT curve moved up while the longer end hardly budged. TYVIX is at 2017 lows going into FOMC week, but it appears equity volatility may be pricing in some uncertainty in front of this week’s Fed decision.
Needless to say and already mentioned, VXST is the big attention getter on the table below with a 24% gain last week. The Ten-Year futures dropped more in front of higher rates, but note that TYVIX, which closed[...]

VIX was higher and all VIX futures were lower last week. We have been in a pretty steep state of contango which flattened a bit. However, there are expectations that April will remain elevated due to market conditions in Europe. This will be explained a little more below.
The VSTOXX term structure appears below and note the elevated April futures contract price relative to the spot index (it’s impossible to miss). This shape has been around for a while now and we’ll[...]

Last week small cap stocks took it on the chin with the Russell 2000 (RUT) dropping about 2.5% while the Russell 1000 (RUI) actually gained about 0.7%. The divergence between the two widened to over 5% with RUI in the lead for 2017.
VIX gained a bit last week which narrowed the gap between the CBOE Russell 2000 Volatility Index (RVX) and VIX to around 40%. This is low by 2017 standards, but still pretty high relative to the long-term history of these two indexes.
The[...]

Today’s What’s Trading focused on a Bull Put Spread using Russell 2000 (RUT) quarter end options expiring on March 31st.
For 2017, as of mid-morning today, the S&P 500 (SPX) is up about 3% more than RUT, which is a reversal of year end price action that saw small cap stocks as represented by RUT out performance the SPX by over 10% from election day to December 31st.
Note the elevated level of RUT implied volatility of RUT options as represented by the CBOE Russell[...]

The Russell 1000 (RUI) gained about 1.5% last week and is now up over 5% for the year while the Russell 2000 (RUT) was up 0.8% and is trailing RUI up a tad more than 3% for 2017.
The relative implied volatility of Russell 2000 options dropped to a historically more normal level last week after spending most of this year at the top end of the historical range.
On Wednesday RUT managed to close over 1400 which bought out at least one trader with a short term bearish outlook. With about 30[...]

It was a quiet week for the markets with a lack of economic data, the earnings calendar being light (that changes next week) and our president elect speaking to the press but not making statements to impact the equity markets too much. The result was a 0.35% gain for the Russell 2000 (RUT) and a drop of 0.04% for large cap stocks as represented by the Russell 1000 (RUI).
The next chart is a regular feature in this space. I decided since the premium of the CBOE Russell 2000[...]

Shares of Kate Spade (KATE) made a mid-day headline grabbing move as news came out saying the company was considering putting itself up for sale. A couple of things happened before the news that have people talking. The first was in the option market where a few minutes before the stock rallied there were a few very well timed call option purchases. The time and sales below highlights some of the bigger trades from today.
Data Source: LiveVol Pro
The buy of just under 2,000 KATE[...]

Yesterday, astute market observer and Options Institute Instructor Kevin Davitt pointed out that the SPX Put Call Ratio had closed under 1.00 three days this month (Dec 7th, Dec 8th, and Dec 13th). I knew this was a rarity, but didn’t realized how rare it was for this ratio to close below 1.00. In fact, it has only happened sixteen times since July 2010 (which is how far back the data goes back on CBOE’s website). Five of those sixteen occurrences happened in 2016 –[...]

The volume may not have been great behind the shortened trading week's gains, but a gain in a gain nonetheless. And, this one was particularly noteworthy in that all the major indices made their way into record high territory.... at a time when they weren't supposed to.
Can it last? That's the $64,000 question. From a momentum and technical perspective, the picture is bullish - yes, there's reason to expect more upside from here. But there is reason to believe the rally may sputter soon and possibly[...]

Even though the market didn't end the week on a wildly bullish foot, it ended the week with another respectable gain. The S&P 500 (SPX) (SPY) was up 0.8% for the five day span following the previous week's 3.8% gain.... and all of that 3.8% gain came in just the last three days of that election week. Either way, the persistent bullishness has left the S&P 500 within striking distance of record highs. It's still got a bit of a valuation problem, but between the momentum and this bullish[...]

I got a heads up this morning about a pretty darn interesting trade that came into the Russell 2000 (RUT) pit this morning. With RUT around 1300 there was a put butterfly that is looking for the small cap benchmark to be about 100 points lower on January 20th of next year. Not only is that standard option expiration date it is also the day we will inaugurate our next president.
The specific trade involved buying 7,000 RUT Jan 1240 Puts for 20.50, selling 14,000 RUT Jan 1200 Puts at 12.80,[...]

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